An Atom-powered Intel? Not a chance

With Intel's focus on the new Atom-brand processors being described at the Intel Developer Forum this week, "Atom-powered" is the obvious description of the mobile Internet devices (MIDs) these chips will go into... and it seems like half the IDF stories on the Internet this week are using that phrase.

Intel's Atom processor (on the right) and its companion System Controller Hub code-named Poulsbo.

(Credit: Intel Corp.)

Intel, however, seems to want even more hyperbole-- it expects people to believe that Atom will recharge the whole company. CEO Paul Otellini reportedly said "This is as important to Intel as the launch of the Pentium in the mid-1990s"-- but that's ridiculous.

The original Pentium processor and its descendants were responsible for nearly all of Intel's revenue. Atom will be merely a blip on Intel's financial reports.

The problem with Atom, especially these early models, is that the niche they occupy is a no-man's land between truly mobile devices like cellphones and MP3 players, and truly powerful devices such as laptop computers.

Atom consumes ten times as much power as cellphone processors and one-tenth the power of laptop processors. This power consumption makes for a device that has to be larger than a cellphone, and has to be smaller than a laptop because it can't provide comparable functionality. And there simply aren't enough applications that fit naturally into devices in that size range.

Look, I have as much experience with MIDs as anyone. I used an Apple Newton for seven years (as I've written about here several times). The Newton had roughly the same form factor and somewhat lower power consumption than today's MIDs. For a while I had a Metricom Ricochet wireless modem that gave me wireless Internet access.

But the simple fact is that the Newton wasn't useful enough to make me carry it around all the time. I loved mine because I had one critical application for which it was perfect. It was my electronic reporter's notebook, and no small-screen device could ever substitute for it. But most people don't need one of those.

And most people don't need a 5" to 7" display for basic Web browsing... at least, not enough to actually carry one around. And if you can carry something too large for a pocket, you can carry a small notebook PC that can handle a traditional notebook CPU.

Even after the Atom family evolves to the point that it can fit into cellphones-- which is the only way it's going to achieve significant sales volumes-- profits from these chips will never be very high. Intel's never going to achieve a monopoly in cellphone processors, and the competition from ARM-based cellphone chips will keep the value of a CPU core under a few bucks.

What Intel doesn't want people to think about very much right now is that in a cellphone, the CPU core is about the least-valuable part of the system. Even in a MID with an Atom processor, the CPU is just a tiny part of the whole package. Look at that picture up there-- the Atom processor is small compared with its companion system controller. In a cellphone, there's even more circuitry required for the radios.

And that's why Intel's never going to be an Atom-powered company, and I'm sure Otellini knows that in spite of everything he's been saying. But when your stock price has been trending downward for seven years in spite of the fact that you're running the world's largest semiconductor company with a stranglehold on the world's largest semiconductor market, I suppose you have to try to drum up as much excitement as possible for every new product that comes along.

[kkrewell]

Yahoo picked up on this blog comments:
http://finance.yahoo.com/tech-ticker/article/9936/Intel's-Atom-Small-News-for-Investors?tickers=intc,aapl,rimm
Peter, while I agree with most your comments, I do think this is a significant attempt by Intel to extend the PC model further down to lower price points (without the subsidized business model of cell phones with the carriers). Of course, Intel wants to maintain its prized margins, so the die is very small but the price, not so much.

I'm just curious to see how its performance compares with a Dothan Pentium M class processor. On the surface it looks like the de-evolution of the PC processor.

[thriftyT]

"And most people don't need a 5" to 7" display for basic Web browsing... at least, not enough to actually carry one around. And if you can carry something too large for a pocket, you can carry a small notebook PC that can handle a traditional notebook CPU."

I can't disagree with your logic, but I differ with you on the assumptions you make above.

I believe that people would love to have a 7" display instead of squinting at a cell phone screen.
I believe that most people that would love to have a 7" to 9"-screened machine do not carry a small notebook because of cost. Subnotebooks cost ~ $2000

Judging from the low power consumption of the Atom (relative to conventional notebook CPUs), the low cost (~$125) and a processor that packs equivalent processing power to a G5 processor...

The possibility of a $600-$800 sub sub notebook with 8 hrs of battery life running XP or a lite-Leopard (Full Lepoard?!!!)and an 8" screen becomes tantalizing.

[Peter N. Glaskowsky]

I agree that even slightly larger displays are much better for web browsing than typical smartphone screens. But the problem is that there's also a step function in portability here. A device even slightly larger than a cellphone is much less portable.

I've thought about this overnight and I'd like to say that the situation is generally better for women who carry purses and anyone who constantly carries a backpack, messenger bag, etc., since a MID is much more practical for these carrying systems than a laptop is.

I still don't think there are enough people in this position to create much of a market for MIDs, though. When you go to bars, restaurants, movie theaters, etc. you still don't see most people carrying anything that could contain a MID, and unless a MID is _always_ with you it basically isn't worth buying.

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[sridhar1803]

What were people carrying around before they started carrying around Laptops ? Nothing. But yet laptops caught on because of their utlity value and the usefulness of having one with you all the time. I am sure there would have been sceptics saying laptops are too heavy, too costly.

Even if you take cellphones, compare the avrerage size & weight of a 3G-cellphone to a non 3G one. The 3G ones are larger (with larger screens) & heavier. Many people prefer a smaller phone with no fancy features because the screen is so small and interface clunky anyway. So why bother ?

Any disadvantage a MID has in terms of form factor can be overcome by offering the right level of functionality. That shouldn't be difficult considering that these will be carrying X86 chips inside.

[Peter Glaskowsky]

Well, my point is that people DON'T carry around laptops.

Yes, 3G phones are larger than non-3G phones, but there's still a critical limit to how big they can be. I have an i-Mate Jasjar (aka the HTC Universal), which was an early 3G/Windows Mobile 5 smartphone with a VGA screen. It's WAY too big for most people to carry around, but it's still much smaller than any MID.

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[Atomic_Teeda]

Looks like Intel is running out of Atom chips not because they are under the committed shipment volume but because the demand is extremely high. At least manufacturors are excited about Atom and see a lot of potential in the use of it. We'll see if the consumer will eat the hype up or not. But one thing I agree with you Peter is that demand/market for Atom is probably not big enough to overtake the microprocessor core-business of Intel. I guess that arguement is irrelavent if the company is going to make a lot of money anyways.